Budget 2020: What’s in it for construction businesses

The COVID-19 pandemic has wreaked havoc on all aspects of life as we know it, the economy included, leading to a debt nearing almost $1 trillion.

That is why the Budget handed out this week was perhaps the most important in living memory to address ways to recover the massive economic losses incurred and uncover plans to restore and create more jobs.

The Budget 2020 had construction and infrastructure firmly on the agenda, with industry reps especially lauding the measures introduced to aid in investment and put more people in jobs.

Here are the key measures announced in the Budget 2020 designed to boost the construction industry and businesses and how you might benefit from it.

Since the start of the COVID-19 pandemic, the Government has committed to invest an additional $14 billion in new and accelerated infrastructure projects over the next four years which are anticipated to support a further 40,000 jobs.

The investment is part of the Government’s 10-year transport infrastructure investment pipeline, which has been expanded to $110 billion.

The Government has also committed $3.5 billion towards improving water infrastructure.

Some key projects the money will go to include:

An additional $2 billion will go towards road safety that will support upgrades including the installation of wire rope safety barriers to reduce accidents caused by running off the road or swerving into the wrong lane and rumble strips.

The additional investment builds on the $500 million the Government has previously invested in targeted road safety works.

While this measure applies directly to first home buyers to help them get in the housing market easier and quicker, the incentive is expected to boost construction in the housing space.

Under this expanded measure, an additional 10,000 first home buyers in 2020-21 can secure a loan to build a new home or purchase a newly built home with a deposit of as little as five per cent, with the Government guaranteeing up to 15 per cent of a loan.

Building on the new and improved Instant Asset Write-off scheme introduced earlier this year to increase investment in the wake of the global pandemic, the new ‘Temporary full expensing’ program not only extends eligibility but also value of the asset one can claim on.

From 7.30pm AEDT October 6, 2020 to June 30, 2022, businesses with turnover up to $5 billion will be able to deduct the full cost of new, eligible, depreciable assets of any value in the year they are first used or installed ready for use.

That means businesses can purchase new midi excavators worth $500,000 and write them off on their next tax return.

The Instant Asset Write-off scheme has also been extended from December this year to June 2021, giving businesses another six months to take advantage of the incentive.

Companies with turnover up to $5 billion will be able to offset tax losses against previous profits and tax paid in or after 2018-19, up to June 2022.

This measure is designed to help companies that were profitable and tax paying but now find themselves in a loss position due to the COVID-19 pandemic.

By allowing them to access their losses earlier, by way of a cash refund, it will provide a cash flow boost to keep their business running, retain their workers and invest.

Since March this year, the Government has announced several packages to support apprentices in jobs, to the tune of $4 billion in total.

The most recent package, costing $1.2 billion, will go towards paying 50 per cent of new apprentices’ wages.

However, the incentive is capped at 100,000 places and will run from October 5, 2020 to September 2021 to a maximum of $7000 per quarter.

In a move to entice employers to take on additional employees aged between 16 and 35, the Government has invested $4 billion in a new JobMaker Hiring Credit.

Under the program, eligible employers will have access to credit for each new job they create over the 12 months from October 7, 2020, for which they hire an eligible employee for a maximum claim period of 12 months from their employment start date.

The credit will be:

The Government is investing an additional $2 billion through the Research and Development Tax Incentive (R&DTI).

For small claimants with turnover less than $20 million, the Government will increase the refundable R&D tax offset to 18.5 percentage points above the claimant’s company tax rate, and there will be no $4 million cap on annual cash refunds.

For larger claimants, the Government will streamline the intensity test from three to two tiers and increase the non-refundable R&D tax offset rates. The new rates will be the claimant’s company tax rate plus 8.5 percentage points for initial R&D expenditure up to two per cent R&D intensity, and 16.5 percentage points for R&D expenditure above two per cent R&D intensity.

The Government will also increase the cap on eligible R&D expenditure from $100 million to $150 million per annum.

These changes apply from July 1, 2021 and is expected to support more than 11,400 companies that claim the R&DTI.

Construction peak organisation, Master Builders Australia, has welcomed the Budget announcements, saying it will build confidence, protect business viability and save jobs.

“Making building and construction the keystone of COVID-19 recovery is the right call by the Government,” said of Master Builders Australia CEO, Denita Wawn.

“Productivity enhancing infrastructure, including local community infrastructure, wage subsidies and massive tax incentives for builders and tradies to invest means the Government is putting in place the right foundation for recovery.

“Hundreds of thousands of small building and construction businesses will now have hope that they can stay afloat,” she said.

Wawn added the extension of the First Home Loan Deposit scheme and the cash injected into the construction of new affordable housing will allow thousands more people to own a new home for whom it previously seemed out of reach.

“It will unlock even more investment and further activate residential building as the engine of economic growth and employment,” she said.